Global Alliances and Strategy Implementation - International Management - Lecture Slides, Slides of International Management

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STRATEGIC ALLAINCES AND OTHER

MODES OF ENTRY

Strategic Alliances are agreements to collaborate with either actual or potential competitors Entry modes address the best means of entering a foreign market

Why the change in focus?

• The need to pursue multiple sources of competitive

advantage.

• The rapid changes in the environment (costs, short

PLC, need for scale economies, protectionism)

• Inadequate resources and inability of a single MNC

to go it alone

• The need to simultaneously achieve the three goals

of efficiency, flexibility and worldwide learning.

Why Strategic Alliances are increasingly

attractive?

• Need for technology exchange (boundaries between industrial sectors are getting blurred, e.g.... lens)
• To participate effectively in global competition, using global standards, Learning
• Risk reduction by pooling resources together, short PLC, R&D Cost
• Protectionism

Advantages of Strategic Alliances

• Help get access to a foreign market (CAT in Japan.)
• Sharing of fixed costs (Boeing’ SA with Japanese companies)
• It helps to bring together firms with complementary skills and assets (France’s Thompson and Japan’s JVC)

• Collaboration to help establish industry standards (Phillips and Matsushita in digital compact cassette)

• Distribution of risks and costs may not be as clear
• Different cultural context may make alliances difficult, e.g.... measure of performance in Japan and U.S..

Making alliances work

• About 2/3 of alliances fail
• Choosing the right partners , financially solvent, skilled, and share vision of alliance, and not opportunistic e.g... GM and Daewoo in South Korea did not work out. In 2002 GM bought Daewoo
• Have realistic expectations ( not appropriate to use same performance measures across national boundaries)

Other Modes of Entry

Other Modes of entry

• Exporting - initial step into IB
• avoids costs of establishing manufacturing overseas.
• firm establishes location and experience curve economies faster.
• high transportation cost, subject to trade barriers, navigating local channels of distribution.

• good entry mode where FDI is restricted
• creating competitors
• no long term presence in a market.

Licensing

• a licensor grants the rights to intangible property to licensee for a period of time for a fee.
• intangible property can include patents, process, copyrights, and trademarks

• difficult to coordinate global strategies
• difficult to achieve location and experience curve economies.
• Licensing has been popular as a means of technology transfer.

Franchising

• a specialized form of licensing
• it is for a longer term, and the franchisee must follow strict rules of doing business.
• has same advantages and disadvantages as licensing.
• quality control is another problem in franchising.